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On May 15, the FCC released a Notice of Proposed Rulemaking (“NPRM”) aimed at adopting new Net Neutrality rules to replace those struck down by the D.C. Circuit in January. The NPRM proposes to enhance the Transparency rule that the court left in place, readopt the No-Blocking rule that the court vacated under a new rationale and use it to set a minimum required level of access to edge providers, replace the struck-down Non-Discrimination rule with a “commercially reasonable practices” standard, and use Section 706 of the Communications Act (“the Act”) as the statutory basis for doing so. The FCC also asks for comment on alternatives to these proposals, including whether to reclassify Internet service as a Title II telecommunications service, which would subject ISPs to common carrier regulation.

The biggest change from the 2010 rules is the replacement of the Non-Discrimination Rule with the Commercially Reasonable Practices Rule, which may provide broadband ISPs more flexibility to experiment with business models that include traffic prioritization and negotiating directly with edge providers. However, the FCC is vague on the details of what might be considered “commercially unreasonable” – rather than proposing a definition, the NPRM asks the public to identify what factors should be used to evaluate commercial reasonableness. In addition, the NPRM suggests that a blanket prohibition on paid-prioritization of edge provider content would not be permissible under Section 706, and so the FCC asks for comment on whether to adopt such a prohibition and whether to reclassify broadband Internet service a Title II telecommunications service to do so. Though the NPRM proposes adopting rules under Section 706, at least two Commissioners stated at a recent FCC meeting that they oppose paid prioritization and are open to Title II reclassification.

Discussion

The Need for Net Neutrality. The NPRM begins by asking for comments on the benefits of an “open Internet” and what sorts of arrangements between broadband providers and edge providers might be cause for concern. The FCC asks specifically about the state of competition in the market for broadband service and whether the FCC should engage in a “market power analysis” of broadband providers. The NPRM also cites the 2010 rules for the proposition that broadband providers have the incentive and ability to limit “Internet openness,” and then asks for comment on these incentives and abilities.

Transparency Rule. The FCC proposes to keep the Transparency Rule adopted in 2010 and upheld by the D.C. Circuit in January:

A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding the use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings.

FCC guidance in 2010 specified that broadband providers must provide such disclosures at point-of-sale and publish them on a website that is available to customers, edge providers, and the FCC. In this NPRM, the FCC proposes to expand the transparency rule in several ways and asks for comments on those proposals, including mandating:

Different, and “tailored,” disclosures for each of edge providers, customers, and the FCC;

The use of a standardized label that would provide broadband customers with information on average upload and download speeds, average monthly price over three years, and usage restrictions such as data caps;

Disclosure of packet loss, latency, and jitter;

Disclosure to transit, CDN (content delivery networks, which host servers in ISPs’ data centers to deliver content from edge providers), and other providers; and

Information about network congestion, including its source, timing, speed, and duration.

The NPRM asks for comment on related issues, such as the effectiveness of the FCC’s “Measuring Broadband America” project that currently measures baseline speed and latency of the 12 largest fixed broadband providers; whether to apply the proposed expansions of the Transparency Rule to mobile broadband (which is already subject to the existing Transparency Rule); and how to enforce the expanded Transparency rules, including monetary penalties and certifications of compliance. The NPRM concludes its section on transparency by asking whether the FCC itself should publish a list of ISPs that block or limit traffic, or have pay-for-priority arrangements.

No-Blocking Rule. The NPRM proposes to adopt the exact same No-Blocking rule adopted by the FCC in 2010:

A person engaged in the provision of fixed broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management.

A person engaged in the provision of mobile broadband Internet access service, insofar as such person is so engaged, shall not block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider’s voice or video telephony services, subject to reasonable network management.

The D.C. Circuit rejected that rule on the grounds that, as described in the 2010 order, it constituted per se common carriage regulation. However, the court suggested that the rule might not be considered common carriage if it allowed, for example, “individualized bargaining and discrimination” above some minimum level of required service.

In this NPRM, the FCC proposes to take the D.C. Circuit up on its suggestion and establish a minimum level of access to all edge providers (no-blocking), but allow agreements for priority traffic in excess of that minimum level. Such agreements would be subject to a commercially reasonable practices rule (see below). However, the FCC does ask for comment on alternative approaches, such as whether to prohibit priority agreements between ISPs and edge providers altogether, and what legal theory the FCC could rely on if taking such an approach.

The FCC asks for comment on how to define the minimum level of access that broadband providers would be required to furnish and how to monitor this level of access, recognizing that the nature of the Internet is that network performance will temporarily dip below the minimum at times. Some of the FCC’s suggestions for defining the minimum level of access include (1) requiring a “best effort” delivery of Internet traffic, measured as the “typical level of service” for each type of traffic – voice, video, text – against the technical capacity of the provider’s network; (2) establishing specific technical parameters, such as speed; or (3) using a “reasonable person” standard, in which the minimum is what a typical subscriber would expect.

The FCC then asks for comment on how to apply the No-Blocking rule to devices and how to apply the rule to mobile broadband, particularly in light of the increased use of Wifi to offload mobile broadband traffic. With regard to devices, the NPRM asks whether the ability to attach non-harmful devices to the network should be included as something a “reasonable person” would expect. With regard to mobile broadband, the FCC asks how to define minimum access in the mobile context and whether to expand the No-Blocking rule to cover all applications that compete with the provider’s own applications – not just voice and video telephony.

Non-Discrimination/Commercially Reasonable Practices Rule. In light of the D.C. Circuit’s rejection of the FCC’s 2010 Non-Discrimination Rule as a per se common carriage obligation, this NPRM proposes adopting a rule to prohibit “commercially unreasonable practices… in the provision of broadband Internet access service... that, based on the totality of the circumstances, threaten to harm Internet openness.” In keeping with the court’s suggestion that a more flexible approach which specified the types of practices that might fall afoul of the rule, the FCC’s proposed rule would allow individually negotiated agreements with edge providers, but would subject those agreements to a case-by-case evaluation of their commercial reasonableness.

The NPRM suggests several categories of factors that the FCC would use to evaluate whether a particular practice is commercially reasonable, and asks for comment the specific factors that the FCC should adopt. The categories in which these factors would fall include:

Impact on Present and Future Competition. Factors that the NPRM suggests might fall in this category are those that the FCC has used in resolving adjudications under Section 628(b) of the Act, which prohibits unfair methods of competition by MVPDs and some programmers; those the FCC considered in the Comcast-NBCU transaction, such as a rebuttable presumption that prioritizing affiliated content is commercially unreasonable; and those that the FCC generally considers when evaluating exclusive contracts between a vertically integrated cable operator and affiliated programmer.

Impact on Consumers. The FCC asks for comment on what factors might get at harms to consumers, other than competitive harms. The NPRM suggests this might include analyzing transparency and end-user control over content delivery.

Impact on Speech and Civic Engagement. The NPRM proposes to adopt factors that gauge the impact of ISP practices on civic engagement and free-speech.

Technical Characteristics. The FCC asks for comment on what technical factors should be assessed in determining the commercial reasonableness of broadband provider practices.

Good Faith Negotiations. The FCC asks for comment on whether to apply a “good faith” requirement on negotiations between broadband providers and edge providers, or whether to consider good faith negotiation as a factor in determining commercial reasonableness.

Industry Practices. The NPRM seeks comment on whether some industry practices, including those adopted by standards-setting organizations, should be included among the factors, and what those industry practices might be.

The NPRM goes on to ask if certain conduct should be considered per se commercially unreasonable, such as all or some pay-for-priority agreements. The NPRM then suggests that there may be certain “safe harbor” practices that would be assumed to be commercially reasonable or at least be evaluated separately from that standard. The FCC proposes to include all mobile broadband provider practices in this latter category, meaning that the Commercially Reasonable Practices Rule would not apply to mobile broadband. The FCC also asks for comments on whether to apply the safe harbor to non-exclusive agreements between broadband providers and non-affiliated edge providers.

The FCC proposes to adopt the Commercially Reasonable Practices Rule under Section 706 of the Act, which the D.C. Circuit found grants the FCC the authority to adopt rules that promote broadband deployment and adoption. However, the FCC also asks for comment on alternative legal theories for adopting such a rule or legal theories for readopting the Non-Discrimination Rule, including Title II reclassification of broadband providers as common carriers (which the FCC notes does not itself ban discrimination outright, but only “unjust or unreasonable” discrimination).

Title II Reclassification. Though the FCC proposes to use Section 706 as jurisdictional authority, the NPRM asks whether the FCC should instead rely on Title II of the Act and reclassify broadband service as a Telecommunications Service subject to common carriage obligations. The NPRM seeks comment on two approaches to Title II classification: (1) reclassifying broadband Internet access service as a Telecommunications Service; and (2) classifying only the service that broadband ISPs provide to edge providers as a Telecommunications Service. The FCC notes that the D.C. Circuit’s January decision stated that “broadband providers furnish a service to edge providers, thus undoubtedly functioning as edge providers’ ‘carriers’.” On that basis, the FCC suggests that it might be possible to distinguish this service from the broadband service provided to consumers, and could potentially be regulated separately and differently. This is similar to the approach proposed in a petition recently filed by Mozilla and a letter filed by two academics from Columbia University, Tim Wu and Tejas Narechania. The NPRM then asks for comment on the extent to which the FCC should forbear from applying certain provisions of Title II if the FCC decides to classify any type of broadband service as a Title II Telecommunications Service.

Conclusion. The NPRM proposes to once again use Section 706 of the Act as the legal authority for imposing Net Neutrality. The FCC is careful to follow the language of the D.C. Circuit’s January 2014 opinion in crafting its proposed rules and their legal underpinning, leading to a set of proposed rules, and particularly the Commercially Reasonable Practices Rule, that is more restrained than the 2010 rules and more likely to withstand the inevitable judicial scrutiny. However, the vocal outcry among some commenters and the stated opposition of at least two FCC Commissioners to pay-for-priority arrangements between broadband providers and edge providers, leave some doubt as to the FCC’s ability to pass rules under Section 706 or that don’t prohibit paid prioritization. Therefore, the bulk of the debate and the comments filed over this NPRM are likely to focus on which source of authority the FCC should use and whether to prohibit paid prioritization.

Comments are due July 15, 2014 and reply comments are due September 10, 2014.